Why Are Most Lease Agreements In India Only For 11 Months?

By | August 22, 2022

The amount of stamp duty is determined by the rent and the length of stay.

Have you ever rented a house? If so, your landlord must have instructed you to sign a lease for an 11-month period. In India, this is usually the norm. Though the agreement may be renewed multiple times, have you ever wondered why most rental agreements are just for 11 months?

A rent agreement is a written document that outlines the parties’ rights and obligations as well as the legal relationship between a landlord and a tenant. The agreement’s terms and conditions must be followed by both parties.

Legal experts assert that because of the complex procedures and legislation that favour tenants, it is exceedingly difficult to get one’s property vacated when it is leased out in India. It frequently takes years for the landlord to receive justice due to procedural delays, during which time the tenant may still be using the property.

According to a report in Economic Times, if the tenancy is less than a year, there is no need to register. A lease agreement with a duration of less than a year is not required to be registered under section 17 of the Registration Act of 1908. This implies that leases less than a year can be signed without registration.

When a lease is less than a year, one can avoid paying stamp duty by choosing not to register the lease, saving money in the process.

The amount of stamp duty is determined by the rent and the length of stay if one chooses to register the rental agreement.

The longer the tenancy, the higher the stamp duty. Therefore, even if a rent agreement is registered, a shorter duration will help to reduce the large lump sum that would be paid in stamp duty.

Therefore, as long as it helps the landlord and tenant avoid paying a larger amount, both parties often stay on the same page. Many people choose to get their rental agreement notarised instead of registering it.

According to a report in Financial Express, in the State of Maharashtra, there is a concept known as a leave and licence agreement that can only be for a maximum length of five years. Under this arrangement, the owner, or licensor, permits the licensee to occupy the property only for the specific purposes outlined in the agreement.

In Maharashtra, leave and licence agreements are more common than lease agreements since the licensee is only granted the right to occupy the property for a certain time, while the lessee is granted rights that are more protected by the law.

A similar practice is prevalent in Delhi, where 11-month leases are more common than long-term rentals.

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